30 January 2016

This week ended up being an anti-climax to all those pundits trying to bury the petroleum market at Davos. The Brent index rallied substantially, finishing the week with a 10% gain. This is likely not a definitive pull away from the depressed market, but shows well the utter volatility engulfing petroleum trading.

Exporting nations with little exception show publicly their discomfort with these petroleum prices. For many of them a second year of budget cuts is going to be an hard pill to swallow, that in some cases could spell serious social and political challenges.

24 January 2016

This week was marked by the annual gathering of rich folk at Davos, an event much lauded by the mainstream media. An host of journalists comes to Switzerland, prowling for soundbites and arranging live broadcasts to TV channels all over around the world. Petroleum prices remaining one of the biggest economy stories of the day, the Davos gathering produced an unusual amount of eminent opinions. In all, this made for the most depressive week I can recall for the petroleum market. The collective thinking of the pundits at Davos seems to indicate that petroleum is soon to become dirt cheap and the industry about to disappear.

If the energy soundbites coming out of Davos mirror the thinking of rich folk, then being or becoming rich has little to do with intelligence. Petroleum will not flow to the marketplace if there is not an able industry extracting and marketing it. And this industry (being it private or national) can not fare at this day and age with 30 $/b. The greatest mistake of mainstream thinking is expecting the market to always find some sort of stability.

16 January 2016

Five weeks ago I titled the review "Under 40 hangover", and here we are now at 29 $/b. Since the beginning of this year petroleum prices fell 25%, a fourth in just two weeks. The petroleum market resembles a bottomless well, the black stuff keeps flowing and prices seem to have lost all support. The press ignites with all kinds of dire forecasts, prices are going under 20 $/b, under 10 $/b, even negative prices are now possible. No one has yet predicted Brent to become an imaginary number, but it should happen soon.

As usual, one has to pierce through the barrage of sound-bites produced by the media to get a better sense of what is going on. Even though there are already some signs of declining petroleum extraction in North America, in general, the financial system keeps supporting the petroleum industry. Banks and investment funds fear more a sudden collapse of the energy tied bond market than the losses of selling petroleum below cost. The question is if by delaying the reckoning day, the financial industry is not creating an even worse problem?

09 January 2016

Happy new year then. I have been living in Zürich for a week and things are slowly settling down; the press review thus resumes.

This past few weeks we saw once again rising tensions among major petroleum exporting countries on the backdrop of sliding prices. Brent is back to prices of 2005, prompting ridiculous petrol and diesel prices at forecourts. The open rattling between Shiites and Sunnis has occupied much space in the media, but markets remained unmoved beyond the prospects of escalation.

Beyond this Saudi-Iran spat, Daesh took again the new year to launch a major offensive, this time targeting Libya. Suicide bombs, attacks on petroleum infrastructure, Daesh wants Libya and wants it bad. Earlier this week a few tabloid media in the UK reported the imminent deployment of an expeditionary force to Libya, 6&nbsp000 soldiers leaded by Italy and including sizeable contingents from the France and the UK. Recall here this post from last April, when I postulated such military operation as inevitable. The tab is up for payment.